EnCana Corp. will once again move forward on the Deep Panuke natural gas project offshore Nova Scotia, and 300 MMcf/d of gas could begin flowing as early as 2010.
The company's board of directors approved the $700 million project, which will be located about 175 kilometers off the coast of Halifax. The project is expected to deliver more than US$400 million in royalties to the Nova Scotian province over its 13-year life.
EnCana put the Panuke project on hold four years ago, but following an extensive internal review, it submitted a revised plan that was approved earlier this month by federal regulators (see NGI, Oct. 8).
"Over the next few weeks we will begin awarding contracts, and based on our current projections, we should be onstream in 2010," said CEO Randy Eresman. When the project ramps up, Eresman said the Deep Panuke would produce "between 200 and 300 MMcf/d." He told analysts during a conference call Thursday that it had been a long road to getting the project back on track.
"Over the past five years, EnCana employees, the government of Nova Scotia, federal and provincial regulators and the Atlantic energy community have worked diligently to achieve this important milestone," said Eresman. EnCana, which is Canada's largest independent, is "excited to move ahead with the development of the Deep Panuke discovery."
EnCana also issued its 3Q2007 earnings report last week. The Calgary-based producer said its "key" natural gas resource play production in 3Q2007 rose 15%; overall, it reported an 8% increase in gas production in 3Q2007 to 3.63 Bcf/d, mostly driven by double-digit production increases in six of the company's nine gas resource plays, led by Cutbank Ridge in northeast British Columbia (47% increase), East Texas (36%), Bighorn in west-central Alberta (32%), Jonah in Wyoming (29%), and coalbed methane output in central and southern Alberta (22%).
Cutbank Ridge, which showed the biggest gains year-over-year, increased on more production from the Cadomin zone, along with an increasing contribution from the Montney and Doig formations, EnCana said. The increase in Jonah, EnCana's second largest resource play, "can be attributed to improved response from frac stimulations and increased availability of capacity on regional pipelines due to system expansion and added compression on the gas gathering system."
EnCana's gas output to date in 2007 has averaged about 3.5 Bcf/d, in line with full-year guidance of 3.46 Bcf/d. Current production is about 3.6 Bcf/d. The company said it is on track to "modestly" exceed its full-year natural gas production guidance, and it now expects to achieve closer to 4% growth in gas production, slightly higher than its original 3% growth forecast.
EnCana last month threatened to reduce its 2008 capital investment in Alberta by 30-40% in 2008, or about $1 billion, if all of the recommendations in the Alberta Royalty Review Panel were adopted (see NGI, Oct. 1). Alberta Premier Ed Stelmach issued those recommendations on Thursday (see related story), and Eresman said EnCana now will wait to respond.
"Until we've had sufficient time to look at them, we will not be providing any comments," Eresman said. "We are very focused on North America, and on natural gas and oilsands. We're well positioned to deliver on the results for this year and we are ahead of our target for 2007." However, Eresman noted, "The year's not over yet, and there are external factors that can influence the results."
EnCana reported that profit in 3Q2007 fell to $934 million ($1.24/share) from $1.36 billion ($1.65) in 3Q2006. However, in the year-ago period earnings increased on a one-time gain from property sales. Operating earnings, which exclude most charges, dropped 11% to $961 million ($1.27/share) from $1.08 billion ($1.31). Cash flow jumped 17% to $2.22 billion ($2.93/share) from $1.89 billion ($2.30).
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